Want to be debt free with min. Cards

Want to be debt free with min. Cards

So I'm new here and I'm looking for some advice with minimal criticism

my fiancé and I are trying to dig ourselves out of debt that we are both responsible for and we are making an aggressive start. Let me start out by saying neither of us have lived by a budget or waited for what we wanted before we bought it. If there was a credit card they'd give us we'd take it. Barely approved for our house 8 years ago and spent every bit they approved us for. Very wasteful and foolish with money, you get the idea...

so 3 years ago I had my second back surgery and my income was cut by 1900/month and we continued living as we were. We have paid off (I even several times before we ) have paid off all of my/our debt several times with tax return, consolid. Loan etc only to go out and near max out yet again...

so now that both of us are finally grown up and serious about this journey we began the cutting of the cards...We have many separate cards as well as several joint cards, since we have proved to be irresponsible In the past we have thought to each hang on to bone card (our lowest interest,best perks card)

Looking for advice on this matter, we both have pretty rough scores (high 5s maybe low to mid 6s). We had 31 cards between the two of us and over the past six months have gone down to 24. I'm looking to be down to 12 by June and then continue to cut and close after that (the higher balance cards)

is it a bad idea to cut up this many cards and close these accounts to get rid of the temptation or is it possible to rebuild our credit each keeping the single card (for awhile all 31 cards had a balance and I was missing payments (never more than 5 days) because I couldn't even track them all. Anyway thanks ahead for input input you may be willing to share (hope I posted in the right place

Re: Want to be debt free with min. Cards

I'd also pay them off from lowest to highest. I personally wouldn't cut them up, unless my spending habits were so that using the CCs were an addiction. Otherwise I would pay them off, keep them open, and use once in a blue moon to keep enough activity on them to keep from being closed. Closing them will hold back or even hurt your scores because FICO will ignore the balance and CL of any given CC that you close. That'll keep util high on your other cards and high util overall, and that's the source of the drain.

Re: Want to be debt free with min. Cards

Would you close any? I'm mostly worried about not noticing a fee/ fraudulent use with so many cards... I had suspected that cutting/ closing would hurt us, but I think the temptation of a bored Sunday afternoon shopping trip is also scary. Do you think if we did some paying off/credit limit increases it would help to balance out the closing? Even just to take in down to a few cards each, sad thing is I'm a fairly organized person but the Baggie of cards and their balances have always been my downfall.

Re: Want to be debt free with min. Cards

First congratulation on your decision! I would only close accounts which have absolutely no benefit to the scores in terms of AAoA or util. Of course keep the cards which give you benefits. If you want to PIF in the future APR is not important at all but rather other benefits come in like cash back, points, miles, etc. Then pay down highests interest cards first, try to get util below 49% then in the next step down to less than 9% and at a later stage let the cards report 0 balance with 1 of a util of less than 7%. This will probably get best results on Fico scores. Never try to have all cards report with 0 balance as this is contraproductive. Just tested it and got a drop of 15 points for 0 balance reporting on all cards. 1 card with a low balance brought me back up. You might also need some testing with your own profile as Fico does not behave the same way for everybody. Why not simply pay off the cards and at a later stage decide to close them when you are close to your goal and you might have other priorities for your selection than now? If you are worried about not being able to control them I would also use an Excel sheet to keep track and make sure absolute no late payments will occur. The most important is to start with the purchase habit "buy with your credit card the same way as with a debit card" and if you do this you can actually take great benefit from the credit cards. (my debit cards stay in the sockdrawer)

Good luck and do not give up on your goal - you will sleep better debt free !

Re: Want to be debt free with min. Cards

Maybe you want to sign up for a monitoring service? You can not only follow your improvements but also set different alerts. Could become handy if an older inactive account gets a new transaction.

MyFico SW just recently had an offer of 9.95USD per month for 6 months. If interested I would call in and ask if they could offer this to you for the next 6 months. I had no need for the service, signed up the promo and love it so much that I do not know what to do once the price will increase

Re: Want to be debt free with min. Cards

If your goal truly is to shore up the credit rating for the future then prioritize the cards you want to keep by longest age and highest limits. That way you are shoring up your AAoA and CLI position. Unless you think you'll have the discipline to manage dozens of cards on a spreadsheet each weekend as the other poster noted, it's a good idea to get the number down to a managable level.

Re: Want to be debt free with min. Cards

my advice is based on some of the things you posted about that are specific to you and your finace.

namely, number 1, that you have both 'been there, done that' re maxing out cards, having to pay with tax returns and even taking out consolidation loans in the past.... over and over.

number 2, you already have a mortgage (i'm assuming you won't be applying for another mortgage any time in the next few years.

number 3, you are willing now to aggressively get a handle on your cc's and debt.

and number 4, you have so many cards between the 2 of you that you have been late making payments (e.g. 5 days late)

if i were in the position you are in

i would look at closing some cards - starting with any low limit cards with AF's that aren't really serving you well (except to be a temptation to spend/charge more. i would weigh how long the card was open (length of credit history with that card vs your overall length of cc history). i would pay off those cards in full and close them after you are sure there is no balance (and hopefully before any AF comes due).

i would then look at any cards that have small balances(say, less than $100) but you want to keep the card for either reqards or other benefits and pay those off in full

Nest (and you haven't indicated how much $ you have available at this time to dedicate to paying down balances), i would systematically start paying dowm the higher APR balances (i personally hate paying interest!) and hopefully you are able to pay more than the minimum due.

i would SD all the cards that you intend to keep and NOT charge anything until all balances reflect <10% utility (or, preferably $0)

as your balances decrease and you've closed really low CL cards with AFs, i would then take stock of the better (good rewards, no AF, low APR) cards you have left and pro-actively decide which cards to keep and which of the remaing ones to close.

if i had to start keeping a spreadsheet just to be sure i didn't miss a cc payment due to the number of cards i had, in my mind that would tell me i had too many cards

look at your rewards categories and perhaps each of you could choose 1 really good rwqard to keep open individually, and 1 good rewards card to keep open jointly. or choose by MC, visa, discover, amex to keep one of each open individually and one of each to keep open jointly.

imo, once you have closed cards that aren't doing anyting for you (low CL, AF, high APR) and after you have come very close to paying down all of your other cards, you might then start looking at getting CLI increases on your remaining cards.

In any case, kudos and best of luck to you both for recognizing and taking an aggressive approach to getting your cc's and debt under control!!!

Re: Want to be debt free with min. Cards

cim wrote:

If your goal truly is to shore up the credit rating for the future then prioritize the cards you want to keep by longest age and highest limits. That way you are shoring up your AAoA and CLI position. Unless you think you'll have the discipline to manage dozens of cards on a spreadsheet each weekend as the other poster noted, it's a good idea to get the number down to a managable level.

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IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.